8 Supply Chain Metrics & KPIs You Need For A Successful Business

Virginia Miller

October 23, 2024

In this article

If you're running an eCommerce business, then you know that keeping track of your supply chain metrics is crucial to your success. After all, if your supply chain isn't humming along smoothly, it can be pretty difficult to make a profit. Here are eight key supply chain metrics that you need to be tracking. Don't let your business falter – make sure you're keeping an eye on these metrics!

What Are Supply Chain KPIs and Why Are They Important?

Key performance indicators (KPIs) are metrics used to track and optimize supply chain operations. Monitoring KPIs allows companies to identify areas for improvement, meet goals more efficiently, and enhance the customer experience.

Some examples of important supply chain KPIs include:

Perfect Order Index

The perfect order index measures the percentage of orders delivered complete, on time, with accurate documentation, and without damage. This KPI directly impacts customer satisfaction.

Cash-to-Cash Cycle Time

The cash-to-cash cycle tracks how long it takes for a company to convert investments in inventory and other resource inputs into cash from sales. Shorter cycle times free up capital and correlate with higher profits.

Inventory Turnover

Inventory turnover calculates how efficiently inventory is managed by comparing cost of goods sold to average inventory levels. Higher turnover indicates lean operations and avoidance of excess stock.

8 Key Supply Chain Metrics and KPIs

Here are 8 important supply chain metrics and KPIs that companies should consider tracking:

1. Perfect Order Rate

The perfect order rate is the percentage of orders delivered complete, on time, damage-free, and with accurate documentation. This measure directly impacts customer experience.

2. Inventory Days of Supply

Inventory days of supply measures the average number of days current inventory levels will last. While lower levels indicate efficiency, higher targets help hedge against supply chain disruptions.

3. Fill Rate

The fill rate is the percentage of orders filled from available inventory without backorders or lost sales. Improving visibility and inventory management can help increase fill rates.

4. Inventory Turnover

As described above, inventory turnover measures how efficiently inventory is managed. Higher turnover indicates lean and efficient operations.

5. On-Time Delivery

On-time delivery tracks the percentage of orders fulfilled by the scheduled date. This KPI is becoming increasingly important to meet customer expectations.

6. On-Time Shipment

Similar to on-time delivery, this metric measures orders shipped on or before the expected ship date. The difference highlights potential transportation issues.

7. Cash-to-Cash Cycle Time

As explained previously, the cash-to-cash cycle indicates how quickly a company can convert investments into cash from sales. Shorter cycles free up capital and correlate to higher profits.

8. Perfect Order Index

As stated above, the perfect order index is the percentage of flawless orders delivered and an important indicator of customer satisfaction.

The Importance of Supply Chain Optimization

Tracking the right supply chain KPIs provides visibility into operational performance. This enables data-driven decision making to optimize inventory, logistics, transportation, and fulfillment. The result is greater efficiency, capacity to meet customer demands, and business growth.

FAQs

What are the most important supply chain metrics?

Key metrics include perfect order rate, inventory days of supply, inventory turnover rate, on-time delivery, cash-to-cash cycle times, and fill rate. Tracking these KPIs provides visibility to guide operational improvements.

How can supply chain KPIs improve my business?

Monitoring vital metrics enables data-driven decision making to optimize inventory levels, logistics, transportation, and order fulfillment. This leads to greater efficiency, capacity to meet customer demands, and business growth.

What does the perfect order rate metric measure?

The perfect order rate is the percentage of orders delivered complete, on time, damage-free, and with accurate documentation. This directly impacts customer satisfaction.

What does inventory turnover rate tell me?

Inventory turnover measures how efficiently inventory is managed. It compares cost of goods sold to average inventory levels. Higher turnover signals lean, efficient operations and avoidance of excess stock.

Why is on-time delivery important?

On-time delivery measures the percentage of orders fulfilled by the scheduled date. This is becoming increasingly vital for companies to meet customer expectations and demands.

What impact does the cash-to-cash cycle have?

The cash-to-cash cycle tracks how quickly investments are converted into cash from sales. Shorter cycles free up capital and correlate strongly with higher profits.

How can I improve my supply chain performance?

Carefully tracking KPIs makes operational performance visible. This enables data-driven decision making to optimize inventory, logistics, transportation, and fulfillment for greater efficiency.